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How to Conduct Market Research on a Tight Budget

How to Conduct Market Research on a Tight Budget

Most entrepreneurs know exactly what they want to design and build, and they are convinced that everyone will buy one. Yet they often fail to realize that their view is biased by a thousand factors, and will be instantly discounted by potential investors, as well as customers. Business plans with no third-party “industry expert” data on your target market size and growth rate are routinely rejected.

Your business plan must have a prominent “Market Opportunity” section, with industry market size and growth data from real studies. Within this section, investors expect to see footnotes referencing external sources and quotes from recognized domain experts. Sizings guesstimated from you and your friends will raise a big red flag.

Yet most startup teams have no experience in this area, and don’t know what kinds of data to look for, in building this key section of their business plan. Is it possible to get this information without hiring a consultant? Let me offer some suggestions which will allow you to make the case yourself:

  1. Use the Google search engine. The Internet today is an up-to-date Library of Congress at your fingertips. Search on any product or service category for census data, academic research reports, trade association publications, and online newspapers with relevant statistics. Look for growth and opportunity charts than can be used with footnotes in your plan.
  2. Visit local economic development offices. Almost every city, county and municipality has an economic development office which features market research on popular market segments and opportunities in your area. Don’t be afraid to ask the staff for pointers to other sources.
  3. Make a trip to your local university library. On or off the Internet, there are many reputable market research reports available for a price.  Before you make a purchase, and often get the data you need, visit a university library where many of these are stocked for free access.
  4. Browse the local bookstore. Browsing in the business and technology section of your local bookstore is a great way to do market research, while enjoying some quiet time. Information here is always more current than your local library, and you might even buy a couple of books for your own industry update.
  5. Selectively purchase online reports. After exhausting all the free sources, go back to the Internet and order any more esoteric report or association journal that you need. Popular sites include Gartner Group, Market Research Reports, and Frost & Sullivan.
  6. Set up your own informal focus group. In conjunction with some outside expert data, it is a big plus to add your own structured research, like setting up a small focus group and documenting results. Variations include social media feedback, online bulletin boards, telephone surveys, and direct-mail surveys.

There are two types of research that you need in the business plan. The big-picture market opportunity data is required, but called secondary. It consists of background data like demographic information, industry trends and census information. More importantly, you need data as specific as possible to your product and your target market. This is called primary research, and certainly may include data that you have gathered from your own efforts.

The information you discover will allow you to build a profile of your target market and the entire industry. For instance, if you’re developing a product for car owners, you’d want to find out the number of car owners broken down by gender, age, and geography. Then you need to show how much this market segment spends on cars today, with spending growth rates from the past 10 years, and industry projections.

Having no data or only personal projections to back up your opportunity and financial forecast is the kiss of death for any business plan. Obviously it doesn’t stop here. We all know people can use statistics to prove anything they want, so just quoting numbers doesn’t mean your plan is sound. In my experience, paying more for the data doesn’t make it any more sound either, so check the sources listed above for low budget alternatives first.

Related Services: Market & Competitor Research & Analysis.


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Author(s) (other articles by )
Original Publication DateJanuary 26, 2011
Related categoriesCompetitive Research & Analysis, Market Research & Analysis

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  • Jonathan Pirc

    Great post. There are so many new market research options available for market researchers nowadays. No longer do you have to spend thousands of dollars to target a general segment of the population.

  • marshallengland

    The message in this post matches perfectly with our ethos. Everyone could use a little feedback fro their target customers once and a while. Investing the time and a little capital in this initiative will ultimately help new businesses focus on what is important to the target customer as wall as confirm or de-bunk estimations and guesses as to what is wanted and needed in a market. Keep pushing this message.